The Pound Sterling (GBP) faces selling pressure against its major peers on Thursday as the Bank of England's (BoE) leaves interest rates steady at 4.25%. The BoE was expected to do so as it guided a "gradual and careful" stance to the monetary expansion path in the May policy meeting, following an interest rate reduction by 25 basis points (bps).
Investors expected the BoE to leave borrowing rates steady at 4.25%, with a 7-2 majority. However, three Monetary Policy Committee (MPC) members: Swati Dhingra, Dave Ramsden and Alan Taylor have supported for an interest rate cut. These members stated that loosening labour market, subdued consumer demand, and pay deals near sustainable rates encouraged them to endorse further monetary policy easing.
The BoE expects inflation to peak at 3.7% in September and remain just under 3.5% for rest of year.
Going forward, the next trigger for the Pound Sterling will be the BoE's interest rate guidance and the potential impact of energy shocks stemming from Middle East tensions on the inflation outlook
Financial market participants expect the BoE to reassess its moderate policy-easing approach after the latest batch of United Kingdom (UK) employment and wage growth data for the three months ending April, and the Consumer Price Index (CPI) data for May.
The UK labor market data showed some cracks in job and wage growth due to an increase in employers' contributions to social security schemes. Moderate wage growth led to a slowdown in inflation in the services sector, which is closely tracked by BoE officials. The Service inflation cooled down to 4.7% from 5.4%.
Source : Fxstreet
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